Lebanon aims to restart offshore oil exploration

Sunday 24/07/2016
Delay of Lebanese bid­ding process caused several compa­nies to lose interest

Beirut - Lebanese Foreign Minister Gebran Bassil announced plans to move ahead with a stalled auction for offshore exploration by internation­al energy companies.
The auction, originally scheduled for November 2013, was delayed as the government had failed to pass necessary decrees to demarcate the exploration blocks, approve the model production-sharing con­tracts and define the tender proto­cols.
The Lebanese Petroleum Admin­istration qualified 12 international oil companies as operators in early 2004 and more than 30 interna­tional oil firms were qualified by the administration, a level of interest higher than Cyprus and Israel which may also have significant levels of oil and gas in neighbouring waters.
The delay of the Lebanese bid­ding process caused several compa­nies to lose interest, however, and several closed their offices in Beirut.
In addition to the delay, compa­nies may have been put off by the relatively high expense of explora­tion and drilling in the eastern Med­iterranean, where water depths are 4,600-6,100 metres. There are also many opportunities for gas explora­tion in nearby areas.
The eastern Mediterranean also has geostrategic risks. There is the Arab-Israeli conflict, reflected in two-related issues — Israel blocking the development of the Gaza Ma­rine Field and the disputed offshore area between Lebanon and Israel. There are disputes both south and north of Lebanon.
Seismic surveys of Lebanese wa­ters provided optimistic expecta­tions of gas discoveries. Proven petroleum reserves cannot be con­firmed until drilling exploration programmes are implemented. If major discoveries are found, then oil firms will become more interest­ed in further exploration.
Problems could arise in fields that straddle borders. Officially there is a state of war between Lebanon and Israel and the countries have no diplomatic relations. It would be dif­ficult to unify operations in a joint field.
The risks are varied and complex. Some southern Lebanese blocks reach into disputed areas with Isra­el. The southernmost Syrian block passes into Lebanese northern wa­ters.
The United States has been medi­ating the resolution of the disputed area between Israel and Lebanon for three years but no settlement has been reached. The offshore bor­der dispute with Syria is part of a long onshore-offshore demarcation dispute between the two countries. This issue is not expected to be re­solved during the present Syrian civil war.
Gas exploration in the eastern Mediterranean started in Egypt in the 1990s and is ongoing in Pales­tinian, Israeli and Cypriot territorial waters. Major discoveries have been found in Egypt and Israel. Modest discoveries have been made in Pal­estinian and Cypriot waters.
Egypt and Israel are producing gas from the eastern Mediterrane­an. Egypt has converted most of its power stations to run off gas, as well as beginning an ambitious export programme. Israel began produc­ing gas from the Tamar field in the spring 2013. It is planning to export to regional and European countries.
Eastern Mediterranean gas is ex­pected to play an important role in the economic futures of producing countries, particularly if it is con­sumed locally. Domestic gas would help the producing country’s bal­ance of payments, as the gas would replace the oil imports. Gas would also reduce pollution.
Eastern Mediterranean gas re­serves are estimated to constitute about 1% of global reserves. This volume should provide ample sup­ply for local consumption. It could also provide modest quantities to the European market.
Europe is considering increasing gas imports and diversifying the sources of its supplies away from Russia. Eastern Mediterranean gas is one of the sources that Europe is considering.
Lebanon could contribute to the volumes exported to Europe. Exports could be transported by pipeline or as liquefied natural gas (LNG). The volume to be exported will depend on the amount of re­serves discovered and Lebanon’s extent of domestic use of gas.